Powell’s Nuance Was Lost on Markets. Too Bad.
The Federal Reserve chair used his Jackson Hole speech to describe a foggy economic landscape and two-sided risks. Was anyone even listening?
Did you not hear me?
Photographer: David Paul Morris/Bloomberg
Speaking to a Senate Committee in 1987, then Federal Reserve Chairman Alan Greenspan said, “If I seem unduly clear to you, you must have misunderstood what I said.” I wonder if current Fed Chair Jerome Powell is thinking the same thing.
In a widely-anticipated speech at the central bank’s annual retreat in Jackson Hole, Wyoming, on Friday, Powell said the economic outlook “may warrant adjusting” the central bank’s stance on monetary policy. The comments sent stock and bond markets soaring as traders took the comments to suggest policymakers will definitely cut interest rates when they next meet in mid-September. The S&P 500 Index was poised for its biggest gain since May, while yields on benchmark US Treasuries tumbled, foreshadowing lower borrowing costs throughout the economy.